Terrell Equipment Company, Inc., et al. - Page 5




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          that merely has enough merit to avoid sanctions for frivolousness           
          will not satisfy this standard.  Pierce v. Underwood, supra at              
          566.                                                                        
               The determination of reasonableness is based on all of the             
          facts and circumstances surrounding the proceeding and the legal            
          precedents relating to the case.  Coastal Petroleum Refiners,               
          Inc. v. Commissioner, 94 T.C. 685, 694-695 (1990).  A position              
          has a reasonable basis in fact if there is such relevant evidence           
          as a reasonable mind might accept as adequate to support a                  
          conclusion.  Pierce v. Underwood, supra at 565.  A position is              
          substantially justified in law if legal precedent substantially             
          supports the Commissioner’s position given the facts available to           
          the Commissioner.  Coastal Petroleum Refiners, Inc. v.                      
          Commissioner, supra at 688.  Determining the reasonableness of              
          the Commissioner’s position and conduct requires considering what           
          the Commissioner knew at the time.  Rutana v. Commissioner, 88              
          T.C. 1329, 1334 (1987); DeVenney v. Commissioner, 85 T.C. 927,              
          930 (1985).                                                                 
               The fact that the Commissioner loses on the merits or                  
          concedes the case does not establish that a position was not                
          substantially justified; however, it is a factor to be                      
          considered.  Portillo v. Commissioner, supra at 28; Powers v.               
          Commissioner, 100 T.C. 457, 471 (1993), affd. in part and revd.             
          in part 43 F.3d 172 (5th Cir. 1995).                                        






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